UK facing bleakest economic outlook

Firms remained overwhelmingly pessimistic about the outlook for the UK economy despite a slight increase in confidence in recent weeks, according to a new report.

A survey of 200 companies by Lloyds TSB showed that the number expecting their business activity to rise next year jumped from 31% in October to 42% last month.

The "brief respite" followed the latest cut in interest rates, which firms hooped would fuel business activity, said the report.

Service firms were most optimistic about prospects for the coming year, especially those in the South of England.

Trevor Williams, chief economist at Lloyds TSB Corporate Markets said: "Recent interest rate cuts seem to have boosted business confidence and if rates fall further in 2009, as expected, this could do more to fuel optimism amongst firms.

"However, pessimism about the general economy remains widespread and suggests that the bounce in firms' confidence about their own trading conditions is unlikely to last.

"The most recent data shows that the economic climate continues to weaken and we're now witnessing the bleakest economic outlook since the early 1990s, the full impact of which is possibly not yet fully reflected in company activity."